Insulin receptor and IGF-1 (insulin-like growth factor-1) receptor mediate signaling for energy uptake and growth through IRSs (insulin receptor substrates), which interact with these receptors as well as down stream effectors. Oxygen is essential not only for ATP production through oxidative phosphorylation, but also for many cellular processes, particularly those involved in energy homeostasis. The oxygen tension in vivo is significantly lower than normoxia tension and can vary widely depending on the tissue as well as perfusion and oxygen consumption. How oxygen tension affects IRS and its function is poorly understood. Our findings indicate that transient hypoxia (1% oxygen) leads to caspase-mediated cleavage of IRS-1 without inducing cell death. The IRS-1 protein level rebounds rapidly upon return to normoxia. Protein tyrosine phosphatases (PTPs) appear to be important for the IRS-1 cleavage because tyrosine phosphorylation of insulin receptor is decreased in hypoxia and IRS-1 cleavage can be blocked with H2O2 or vanadate, which inhibit PTPs. AKT, a downstream effector of insulin and IGF-1 signaling that is known to suppress caspase activation, is suppressed in hypoxia. Overexpression of dominant-negative AKT leads to IRS-1 cleavage even in normoxia and overexpression of constitutive-active AKT partially suppresses IRS-1 cleavage in hypoxia, suggesting that hypoxia-mediated suppression of AKT may induce caspase-mediated IRS-1 cleavage. In conclusion, our study elucidates a mechanism by which insulin and IGF-1 signaling can be matched to the oxygen level that is available to support growth and energy metabolism.